Fears Cited Over Access to Quake Insurance : Legislation: Consumer advocates are concerned that compromises on competing bills will limit coverage availability.

SACRAMENTO — As lawmakers prepared to thrash out competing bills on earthquake insurance, consumer advocates warned Tuesday that insurers will flee the market if the Legislature fails to guarantee access to earthquake coverage.

The warning comes as a series of earthquake insurance bills advanced through both the Assembly and Senate Tuesday and headed to a conference committee, where consumer advocates fear compromises will limit quake coverage availability.

Dominating the bill package is SB 58 by state Sen. John Lewis (R-Orange). The legislation allows insurance companies to bail out of the earthquake insurance market by eliminating the requirement that they offer earthquake policies along with regular homeowners’ coverage.

Insurers sponsored the so-called “delinkage” measure in the wake of monumental losses suffered in the January, 1994, Northridge earthquake. According to estimates from the Insurance Information Institute, companies paid out $11.7 billion in claims.

Harry Snyder of the Consumers Union said he fears that, by its very nature, the conference committee process will favor insurers over policy holders because the industry carries more clout in Sacramento.

An attempt to appease all sides, Snyder maintains, tends to weight proceedings toward insurers who are unbending in their opposition to the requirement that they continue to provide earthquake coverage.

“Homeowners are at great risk in the conference committee unless the issues are clearly laid out,” Snyder said. “The great fear would be they’d [the lawmakers] take one from the A column, one from the B column and try to . . . mix and match and come up with a proposal. It’s not going to work.”

Joining Snyder at the news conference was a coalition of Democratic Assembly members--former Speaker Willie Brown of San Francisco, Barbara Lee of Oakland and Richard Katz of Sylmar, all of whom pledged to seek seats on the conference committee.

Barry F. Carmody, president of the Assn. of California Insurance Cos., responded that “We are delighted to see that the Assembly Democratic leadership is concerned about the issue of earthquake availability.”

Carmody said his group supports the delinkage bill to reduce financial burdens on insurers. At the same time, however, he said the industry supports finding some other way of continuing to provide quake policies for consumers.

Brown contended, however, that selling homeowners’ policies without earthquake coverage amounted to a sham, since residences in seismically active areas would not be fully covered without earthquake insurance too.

“It’s a bogus sell of a bogus product without the linkage between quakes and homeowners insurance,” he said, noting that “for many people, the only real asset they have is their home.”

Snyder accused insurance companies of collecting earthquake insurance premiums for years, and then trying to abandon their responsibility when time comes to pay out. “To put it in a nutshell, the insurance industry likes to treat our premium dollars like a roach motel--they go in but they don’t come out,” he said.

The bills destined for conference committee are:

* SB 58, the measure to dissolve the requirement that sellers of homeowners’ policies offer quake insurance as well.

* SB 266, by state Sen. Herschel Rosenthal (D-Los Angeles) requiring insurance companies to offer quake coverage of up to $400,000.

* AB 1366, by Assemblyman David Knowles (R-Placerville) requiring insurers to offer a no-frills, bare-bones earthquake policy covering residential structures but few contents.

* AB 13, by Assemblywoman Juanita McDonald (D-Carson) allowing delinkage but developing other forms of quake coverage for homeowners.

The makeup of the six-member conference committee will be determined by Senate President Pro Tem Bill Lockyer (D-Hayward) and Assembly Speaker Doris Allen (R-Cypress), both of whom will appoint three members.